Rakesh Jhunjhunwala has the talent to buy stocks which are at the inflection point. These stocks are usually quoting at very low valuations and have low risk of downside. However, as the circumstances change, the stocks become massive multibagger stocks.

Rakesh Jhunjhunwala Stock Tips

Good expansion plans

Escorts Ltd has a number of expansion plans for growth in the 41-50HP category. It recently launched the Euro 45 and 50 series tractors. These are being sold under the Powertrac brand. The Classic series is being sold under the Farmtrac brand.

The Company has also increased its market share by 40 basis points to 10.6 per cent in FY2016-17.

The world series tractors based on a Porsche design will also be announced by Escorts Ltd in the near future.

Dominant market share

In North India, Escorts enjoys an 18-20 per cent market share. The market share in South India is about 4-5 per cent. The North India market grew 17 per cent year on YoY basis. The South India market grew by 20 per cent YoY.

Expansion in dealer network

The focus in the Union Budget 2017 on agriculture and infra will increase farm income, rural economy and infrastructure development.

To take advantage, Escorts Ltd has identified opportunities in different markets. It is also expanding dealer network in South India.

Escorts is expected to see 14 per cent growth (CAGR) in tractor volumes over FY17-19.

Sales volume of tractors

In the month of February 2017, Escorts has shown an impressive increase of 29.50 per cent in tractor sales. The volume stands at 4,247 units as compared to 3,280 units sold in February 2016.

The domestic sales of tractors increased 28.70 per cent to 4,104 units in February 2017 as compared to 3,190 tractors in February 2016.

The export sales have also put up a robust show. The sales have increased 59 per cent to 143 units in February 2017 as compared to 90 units in the February 2016.

The Company stated that it expects to double the export sales in FY18.

Valuations of Escorts Ltd

The sharp rally in the stock price has also led to expnsive valuations for Escorts Ltd. The shares are presently trading at a price-to-earnings (PE) ratio of 42.88. This is not expensive in comparison to the industry PE ratio of 65.94.

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